30 December 2005 Daily Comment

Sorry folks but the flu bug knocked
us out last night- literally- and there are going to be no words of wisdom
today. It is a fitting end to an exasperating
year. The year end Model Portfolio and performance is posted.

There is no trading until next
Tuesday. Enjoy the time off.

The casino opens bright and early
Tuesday morning.
*****

29 December 2005 Daily Comment

12:54pm and stocks have
been meandering all day as we watch the paint dry. Breadth is positive on the NYSE
and negative on the NAZZ.

We switched half of our Kraft position to Pfizer to spread the
risk and add a drug stock to portfolios. With the dividend we earned on half of
the Kraft position the sale was a scratch.

We also added Coke to a few accounts additional
shares to a few that owned it and we added more National Cityunder $34 to larger accounts.

Treasuries are lightly traded and a bit higher in yield. Oil is $60.80 and Gold is $516.
*****

TheBerghoff Restaurant in Chicago
is closing. It was one of the ‘old stockbroker’s’ favorite places and its
closing at the same time as Marshall Field’s losing its name is
a reminder of how time marches on and leaves few traces.
*****

3:02pm and the DJIA closed down 9 points at 10787. The
S&P 500 lost 4 points to end at
1254 and the NAZZ dropped 10 points
to 2219.

Breadth was flat on the NYSE and 5/4 negative on the NAZZ. Volume was light and new highs and new lows were about even.

Treasuries ended with the two-year at 4.37% and the ten-year at
4.36%.

Tomorrow is the last day for the
casino players this year. This sell off
to the end of the year is like the old days. We may get a New Year rally after
all. Then again…
*****

28 December 2005 Daily Comment

Thoughts

The only thing we have to fear is
an inverted yield curve. The two-year Treasury yesterday moved to 4.35%, the
five-year to 4.31% and the ten-year to 4.35%. That supposedly is why the stock
markets tanked.

An inverted yelled curve usually
means recession. But when the inversion occurs in the last week of the year
when many traders and hedge funds and mutual funds books and personnel are on vacation
or purposefully inactive any great signs of recession that the markets see must
be taken with a grain of salt. We aren’t saying recession isn’t on the horizon
although we haven’t believed the GDP figures for two years as signaling a
robust economy for the broad swath of citizens so we don’t think what occur
next year will be much different for ordinary folks.

We must admit we were
disappointed yesterday that the selling is not yet completed, but in years
where the selling has run to the end of the year there usually has been a pick
up in January and so that is the good news.
*****

Overnight Japan
was higher as was and is Europe. We shall see what today
brings us.
*****

Wednesday’s Markets December 28, 2005

9:02am and stocks have opened higher. Breadth is good and volume is
holiday light. According to some folks there was a large S&P 500 sell program all day yesterday and that was the
treason for the drop. Verizon is
under pressure and we will add more shares under $30.
*****

12:01pm and the major
measures are slightly higher. We sold our AEOS
holdings in large/aggressive accounts for
a $1.50 gain and bought some NCC
in larger accounts at $34. AEOS is a stock that can trade at $15 or $30 and neither
price would surprise us or most of the
street. Our aim in holding stocks at this juncture in the market cycle is
to own stocks that have more definable risk parameters. We are happy to trade
AEOS but it will always be an anchovy for us.
*****

Warm weather has inundated the U.S.
for the past week but oil is up because traders are betting that the inventory
number tomorrow will be less than expected. Oil is up over $60 as traders in
the casino are working overtime.
*****

We are doing a bit of switching
from MKC to CMCSA in these last days
of the year. We have too large a position in it to trade on a year end mark-up.
MKC is a name type stock and thinly traded with 50% closely held. We are using
any upswing to exit our positioning some accounts with a scratch profit to buy
Comcast which is on its low for the year. CMCSA
is the largest cable company and much more liquid. The street has been sour on
cable stocks and the general sell off at year end here provides a more reliable
bounce potential in CMCSA with the liquidity to sell it on the pop. For MKC
shares sold today we will receive the 18 pennies dividend next year.
*****

3:02pm and the DJIA gained 18 points to 10795. The S&P 500 rose 2 points to 1258 and
the NAZZ gained 3 points to 2228.

Breadth was positive but new
lows exceeded new highs which demonstrates that year end selling is not
over.

Volume was holiday light.

Oil ended at $59.82 and gold
was $518.

Treasuries were a bit weaker with the two-year at 4.36% and the
ten-year at 4.37%.

Only two more casino days left in
the old year.
*****

27 December 2005 Daily Comment

Thoughts

Japan
was lower overnight and so is Europe. This is going to
be a slow week and since we have basically finished with our Christmas shopping
in stocks we’ll be in a watching mode.

Most of our smaller accounts and
our aggressive accounts are fully invested while larger accounts have a good
deal of cash.
*****

Tuesday’s Markets December 27, 2005

The December 26 Barron’s has an article about GE under reserving at an insurance
subsidiary that allowed former CEO to go out in a blaze of gloriously reported
earnings growth when actually there was none. The article confirms our long
stated complaint about the media treatment of Welch and GE. Actually with Welch
gone we have become more interested in the stock.
*****

10:18am and the major measures are mixed in slow trading. Breadth is flat on the NYSE and
negative on the NAZZ.

The two-year Treasury is at 4.39% as is the ten-year with the five-year at
4.37%.

Oil is lower and gold is
$509.
*****

With many traders expecting a
bland beginning to the New Year in trading maybe the opposite will occur.
*****

12:38pm and with the DJIA
down 86 points the after the year crowd may be looking for a recovery rather
than a rally. The NAZZ is also taking it on the chin in thin trading.

Oil stocks are getting slammed
and that is carrying over to other issues.
*****

3:02pm and the bears won
the day with all the major measures closing lower. Breadth was 2/1 negative but volume
was light and new highs beat new
lows again by a 2/1 margin.

At the bell the DJIA was down 104 points at 10790. The S&P 500 lost 12 points to 1256 and
the NAZZ dropped 22 points to 2226.

Treasuries rallied in light trading wit the two-year and ten-year
closing at 4.34%. The five-year ended at 4.29%.

Oil closed lower and profit taking and trader avoidance took the shares
of oil companies lower with the spot price which ended at $58.16

The casino is open again tomorrow
although the Las Vegas casinos are
probably seeing more action.
*****

23 December 2005 Daily Comment

Thoughts

Ford is going to inject $2 billion into Jaguar for write downs and stuff. We remember when Ford was sitting
on a pile of $4 billion plus in cash and all the smart folks were saying that
they had to spend it to grow their business. Investment banks had just the
company for them, a company named Jaguar. We think two year Treasuries were
yielding 8% and we remember commenting that cash earning 8% wasn’t such a bad
return.
*****

That story reminds of Greenspan
agreeing with the smart guys in Congress in 2001 that it was better to cut
taxes and spend the surplus since the surplus could cause Treasury bonds to
become extinct as they were paid off. Well, Uncle Alan and his friends in
Congress and the White House sure solved that problem and preserved the lives
of Wall Street bond traders.
*****

Albertson’s called off the sale of its business.
*****

Friday’s Markets December 23, 2005

9:40am and the major measures are mixed with breadth positive. We
bought more TWX, VZ, AMAT, and VOD for our large/aggressive accounts
and additional VZ and KFT for many other accounts. We also
are cutting our NYT position in
half. We realized we were overextended in the issue when they announced
yesterday that earnings will be punk for the fourth quarter and we got a queasy
feeling in our stomach. We are holding the other half for a hoped for rally in
the stock at year end or the beginning of next year as selling pressure abates.
Our loss is less than $1 on the sold shares. We are placing the proceeds in Applied Materials on a share for share
basis.
*****

3:02pm and we wish all a Happy Hanukah,
Merry Christmas, and Joyous Solstice and Kwanza.

The DJIA closed down 4 points at 10885. The S&P 500 gained 1 point to 12690 and the NAZZ rose 3 points to 2250. Breadth
was positive at the close and new highs
exceeded new lows by a 3/1 margin.

The Treasury yield curve flattened with the two-year at 4.36% and the
ten-year at 4.37%. Some traders are obviously getting squeezed. Oil ended at $58.43 and Gold closed at $506.

And the casino is closed until Tuesday. We’ll be in and out all next
week paying with the prince and princess but there will be daily posts.
*****

22 December 2005 Daily Comment

Thoughts

We are pleased to
announce the engagement of our daughter Christine (Kelle) to John Martin of
Madison Wisconsin.
*****

Our posts are going to be shorter
during the Holidays. There just isn’t that much going on in the markets and we
are going back and forth between the house and the office doing chores for
Christmas. Also, the prince and princess and their entourage arrive on Monday.
*****

The jobless claims for the latest
week were 318,000. Year over year core inflation
was 1.2% but only in the minds of the inflation number creators.
*****

Thursday’s Markets December 22, 2005

Our stocks should begin to
stabilize in the next few trading days and then we would expect a rise in time.
The stocks we are buying are depressed quality and after the sellers are
finished the removal of the untoward selling pressure will allow them to rise.

9:02pm and the major
measures are slightly higher in dull trading. Breadth is 2/1 positive.

Oil is $58.88 and Gold is $499.
Treasuries are a tad better in price lower in yield.
*****

12:12pm and the NYC transit
strike is over an NYC Christmas shopping is saved. The major measures are all
modestly higher and Treasuries are modestly stronger. Breadth is improving from
an hour ago but below its early strength.

With one more trading day before
the Christmas break we would guess that volume will begin slowing down.
*****

3:02pm and the DJIA closed up 56 points at 10890. The S&P 500 rose 5 points to 1268 and
the NAZZ gained 15 pints to end at
2246. Breadth was positive and new highs exceeded 200 for the first time in a
week.

Treasuries were lower in yield higher in price with the two-year at
4.38% and the ten-year at 4.43%.

Oil closed lower at $58.28 and gold finished higher at $506.

The casino is open tomorrow for end
of the season selling and buying.
*****

21 December 2005 Daily Comment

Thoughts

Happy Winter and now it is warming
up in the land of milk and honey.
*****

The reason that GM was dropping like a sharp knife the
last few days is that Kirk Kerkorian was selling a part of his holdings to take
a tax loss to offset gains made in other stocks earlier this year. GM has problems
but the drop and pressure and shorting by tag along hedge funds who knew what
was occurring all placed extraordinary pressure on the share price. GM is
trading lower this morning but should stabilize in here as traders who weren’t
in the know now realize the pressure was from Kerkorian. He continues to own 44
million shares so he has a stake in the company.
*****

Japan
was up another 2% overnight as the year end mark-up continues. Hong
Kong was higher; Europe is mixed;
Treasuries a slightly higher in yield; oil is up a bit; and gold is down $1.
*****

10:41am and the major measures are higher on decent volume. Breadth has been over 2/1 positive
for the morning and new highs are a bit ahead of new lows.

Treasuries are weaker and oil is down
on inventory numbers

We added AT&T, New York Times and Time
Warner to many accounts. We traded NYT
in the high 30s earlier in the year for a loss but we are buying it back at $27
and change for a year end or longer bounce. We think that the death of the
newspaper business has been overdone. At least we hope it has for the sake of
the country as well as our pocket book.

We increased our KFT and CSCO and SYMC holdings
in our large/aggressive accounts and also added more CSCO to many accounts.
*****

Our stocks are not yet participating in today’s
up move because we are buying year end tax sale and get it out of my portfolio stocks. But all are quality issues and
our time to participate will come, sooner than later.

3:02pm and the DJIA closed up 30 points at 10835 after
being twice as high earlier. The S&P
500 gained 4 points to end at 1263 and the NAZZ rose 10 points to 2231.

Breadth was 5/4 positive and new
highs and new lows were a draw.

Treasuries were weaker with the two-year finishing at 4.43% and the
ten-year at 4.48%. Oil ended at
$58.57 and gold was $498.

The casino is open tomorrow and
we’ll be here.
*****

20 December 2005 Daily Comment

Thoughts

Japan
was up another 250 points and we think that has to do with year end markups of
stocks by banks and companies. The rest of Asia and Europe
were and are more muted to lower.
*****

There is a secondary offering of
5 million shares of Hain Celestial
underway which represents HJ Heinz
ownership interest in the company. Since HNZ couldn’t sell the interest to any
other company and is taking a loss on the shares sale we would think the share
price will trend loser through year end after the offering is completed. The share
price should move lower as folks who thought HNZ would buy the rest of the company abandon ship into the
stabilizing bid on the offering. We sold earlier to avoid the rush and our only
worry was that HNZ was going to buy the rest of the shares.
*****

Housing starts were up 5.3% in November and new permits were up
2.5%. The Producer Prices Index was down 0.7% as oil moved lower in November. Ex food and energy PPIwas up 0.1%.*****

Yesterday the two-year and five-year
Treasuries inverted meaning that the two-year at 4.39% yielded more than the
five –year at 4.38%. In the old days that signaled recession. At the end of
this year we think it signals hedge fund speculation, at least over the short
run.
*****

Tuesday’s Markets December 20, 2005

There’s a transit strike in NYC
so that may slow trading a bit. But with computers and the internet we don’t
think folks who want to trade will miss the day. The habit needs to be fed.
*****

9:18am and GM is now $19.75. That is one falling knife on which we are happy
to have taken our loss and moved on. Our thinking overnight is that there will be
a year end bounce in GM but it will be short lived and we don’t know the level
from which the bounce will come.

Our worry is that bankruptcy has become a tool to break
union contracts and abrogate pension and health care benefits. The steel companies led the way and then
came the airlines and now the auto parts makers. So GM could be next which would mean that only
shareholders and union members would suffer. We are sure management will
survive.

Ford is a different kettle of fish because bankruptcy would wipe
out the Ford families’ shares too. And Ford can just wait for GM to do the
bankruptcy and then force concessions. That is what AMR did after UAL and US Air went belly up. We also think there
were a bunch of Texans including ex CEO Crandall holding shares in AMR and that
they would have been wiped out.
*****

10:01am and oil is higher by 25 pennies. There was an attack on a
Nigerian pipeline. Speaking of Nigeria,
it is a scandal and so sad that the oil money being generated in that country
is not going to lift the lot of the average citizen.

The major measures are meandering
and volume is light. Treasuries are weaker on the housing starts data with the
two-year back to 4.41% and the ten-year at 4.46% only 5 bps higher.
*****

We bought National City
and Disney for many accounts that
didn’t own them and added AT&T, Time Warner and Andrew Corp to our large/aggressive accounts.
*****

1:48pm and the major
measures have been fluctuating back and forth with no discernable trend. There
is still tax selling and clean up selling occurring and it pays to hang around
on these days as we build positions in good stocks that are mostly on their
lows for the year.

So many traders were blindsided
by the sell off in the first month of 2005 that the usual buy year end rally is
suspect. That bodes well for the New Year although we also think the markets
will begin to move higher sometime in the next seven trading days.
*****

3:02pm and the DJIA closed down 30 points at 10806.
The S&P 500 lost 1 point to 1259
and the NAZZ also lost 1 point to
finish at 2222. Breadth was flat on
the NYSE and 5/4 negative on the NAZZ. Volume
was moderate and new lows exceeded
new highs for the first time in a while.

Treasuries were a bit weaker on the housing news with the two-year finishing
at 4.40% and the ten-year at 4.46%.

Gold was down to $495 breaking support and oil finished up 64 pennies at $57.98.

And the casino is open tomorrow
although a lot of the players may have to walk to work. Some may stay home and
play computer poker to get their fix.
*****

19 December 2005 Daily Comment

Thoughts

Well the drug stocks began moving
on Thursday afternoon when Pfizer raised
it dividend and then on Friday PFE received
a favorable ruling on Lipitor’s patents protecting that drug until 2011. The
drug stocks are now out of the range we wanted to own them for a late year
bounce. Nothing ventured yields nothing gained but then it also means nothing
lost. Our downside targets were a bit too aggressive (negative).

We have never liked the drug
companies as corporate citizens and that may have something to do with our lack
of anguish in missing the ride.
*****

Overnight Japanwas up 1.5% and Hong Kong
was up 1%. Europe is mixed and oil is up 50 pennies but under $59 and gold is up $5 to $511.

Treasuries are a bit higher in
yield lower in price as we begin the Holiday week. Trading
may be volatile as more boys and girls at the hedge funds close their books for
the year and head off on vacation.
*****

Monday’s Markets December 19, 2005

10:51am and the DJIA and
S&P 500 are higher on the backs of the big jumps in PFE and MRK. The NAZZ is off a
bit and breadth is 5/4 negative. Treasuries remain a tad lower in price
with the two-year at 4.37% and the ten-year at 4.43%,

Oil is down 96 pennies at $57.10 and gold is $510.

We bought Kraft, Vodaphone and Symantec
for many more accounts. We bought Disney,
National City, American Eagle and Coke for our larger/aggressive
accounts. We are also picking up a bit more EL and SCHL for select
accounts.

With crossed fingers we also bought
some GM for a year end trade in our
large/aggressive accounts at $21.75.
*****

1:44pm and breadth is ugly
with it running over 2/1 negative on the NYSE and NAZZ. The only saving grace
is that volume is light. We think it is some last minute Christmas tax selling.
The big boys and girls will be getting worried about the lack of liquidity as
the week wanes and so they are pushing stuff out the door today.
*****

We can’t live with the GM trade and so we are selling it for a 50 cents
loss. as we often say sometimes we have to buy a stock to know we don’t want to
trade it. All the other stocks we are buying at year end are good quality with
no financial problems. After buying this morning we changed our mind. It is as
simple as that.
*****

3:02pm and the DJIAclosed down 36 points at 10840. The S&P 500dropped 7
points to 1260 and the NAZZ lost 27
points to end at 2225. Breadth was
over 21/ negative most of the day and closed that way.

Volume improved and was brisk into the closed and new highs and new lows were about even.

Treasuries ended a bit lower on the short end and a bit higher past
ten years. The two-year went out at 4.37% and the ten-year at 4.43%.

Gold finished at $506 and oil
went out at $57.24.

The Casino is open all week and closed next Monday December 26 and on Monday
January 2, 2006.

We’ll be happy to wave goodbye to
this year and hope for a better casino run next year.

The casino opens at 8:30am tomorrow and we’ll be here.
*****

16 December 2005 Daily Comment

Thoughts

Google is tailoring its search engine to meet the proscriptions of
the Chinese Government. Thus if the Chinese Government doesn’t want its citizens
to visit certain site they won’t see them on Google. We wonder if that is is already occurring in other countries. The compromise
Google is making in the name of profits is the ultimate one, its own freedom.
And so the Internet’s greatest proponent and beneficiary surrenders to the almighty
Yuan.
*****

Oracle disappointed but Mother Merrill raised its opinion and so
the stock is higher this morning.
*****

Japan and Hong Kong were lower
over night and Europe is higher. Treasuries are firmer, Oil is
lower and under $60 on warmer weather forecast for NYC and Gold is up $2.
*****

Friday’s Markets and Quadruple Witching ends, December 16, 2005

11:13am and the DJIA and
S&P 500 have been higher all day
while the NAZZ has been lower. Breadth is 5/4 plus on the NYSE and the reverse
on the NAZZ. New highs are beating new lows by a 2/1 margin.
*****

1:05pm and in many accounts
we repurchased at $30.58 the Verizon
we sold at $32.25. We also bought CSCO back at $17.65 which is where we sold
it. We had panned on buying a few stocks on expiration day and those are our picks.
For larger/aggressive accounts we also added NYT on its low at $27.35, Vodaphone,
the international mobile phone company with 135 million subscribers that
owns 45% of Verizon Wireless, at $21.85 and Tribune at $30.70. And we bought Estee Lauder and Scholastic,
the book publishers at $29.80 for large/aggressive accounts.

SCHL is down $3.50 today on disappointing earnings. When those announcements
come at year end there is always a rush for the exits and often that is a good
trading opportunity. Of course catching falling knives is always dangerous.
*****

3:02pm and Treasuries closed firmer with the two-year
at 4.35% and the ten-year at 4.44%. Gold
was lower but above $500 and Oil
lost $1.93 to finish at $58.06. It must have warmed up in NYC.

At the bell the DJIA was down 5 points at 10875. The S&P 500 dropped 3 points to end at
12678 and the NAZZ ended down 7
points at 2253.

Breadth was slightly negative at the close and new highs exceeded new lows by 3/2.

And the casino is closed for the week-end so folks will have to content
themselves with football pools, online poker or a quick trip to Las Vegas. We are going snowshoeing.
*****

15 December 2005 Daily Comment

Thoughts

This morning at 9am the Illinois Supreme Court is to announce
its ruling on a class action law suit against Atria a/k/a Philip Morris.
If the shares rise in price from a favorable ruling that will punch the DJIA and S&P 500 through upside
resistance and if the ruling is negative the drop in price will move the
measures back to support.
*****

The CPI was down 0.6%, ex food and energy it was up 0.2%. New jobless claims war 329,000.
*****

We read last night that consumer credit card debt has reached $800
billion. That news was contained in a story about how banks are going after
newly bankrupt individuals because the new bankruptcy laws that that banks
spent $100 million lobbying for make it much harder for recently bankrupt folks
to file bankruptcy again for at least seven years. And some of the provisions
allow the banks to go back after some of the old discharged bankruptcy debt if
the new credit card customer signs on the wrong dotted line. Seems a disgusting
way to make a living but then folks have free choice or do they?
*****

Japan
was down 1.4% overnight while Honk Kong was higher and Europe
is fractionally lower.
*****

Oil, treasuries and gold are all
unchanged. Investors’ Intelligence
had Bulls 58%, Bears 21% for the latest week.
*****

Thursday’s Markets December 15, 2005

9:02am and the Illinois Supreme Court reversed the $10 billion
judgments against Phillip Morris and remanded to the lower court with
instructions to dismiss the lawsuit. So the bad guys win one.
*****

Natural Gas Stocks were down 202
billion cubic feet in the latest reporting week. That is usually what happens
in winter but …

The rally that traders expected with
a positive MO announcement has been placed on hold and the major measures seem
to be in a sell all the other stocks frame of mind. With expirations beginning
this evening anything is possible.
*****

9:58pm and with the DJIA up 6 points MO is up 4 points adding 40 points of that 6 points so the rest of
the DJIA is actually lower. And the S&P 500 is down 4 points with the NAZZ
down 10 points. Breadth is over 2/1 negative and new highs are beating new lows
by only a 3/2 margin.
*****

11:33pm and Oil is down $10 pennies at $60.75 while
Gold is up $2 at $512. Treasuries are weaker with the two-year
at 4.40% and the ten-year at 4.50%.

Stocks traders want to gun the
markets higher because the Fed is going to stop tightening and begin loosening
next year. But they will do that only if they perceive a weakening economy. And
a weakening economy is not good for stocks. Ah the traders say but lower
interest rates will cause a multiple expansion. But that they mean that P/Es
will go from 19 to 24 and stock prices will rise accordingly.
*****

Atria (Philip Morris) wants to spin off its holdings in Kraft and we think that when they do
that KFT will enjoy a much wider
buying pool since it will no longer be associated with Atria. The overturning
of this verdict brings that divestiture closer.

KFT shares are on their low for
the year and with a recently raised dividend that goes ex on December 22 the
shares yield 3.2%. We are buying Kraft in
our large/aggressive accounts for a year end trade or maybe longer or shorter
as circumstances warrant.
*****

3:02pm and the boys and
girls moved stocks down and up and finally down in the last hour as Witching worked its magic. What that
means for tomorrow we have no idea. The DJIA
closed down 2 points at 10882. The S&P
500 lost 2 points to finish at 1270 and the NAZZ dropped 3 points to 2260. Breadth was 2/1 negative at the
close and new highs exceeded new lows by 10 issues.

Treasuries closed unchanged to up a few bps in yield. Oil ended down 86 pennies at $60and Gold ended at $507.

The casino is open tomorrow to accommodate the end of Quadruple Witching and the week and
we’ll be here.
*****

13 December 2005 Daily Comment

Thoughts

Goldman Sachs predicts a spike in oil above $100 per barrel.

Conoco Phillips is paying $35 billion for Burlington Resources.
Five years ago they could have purchased Burlington
for $8 billion. So does today’s purchase demonstrate foresight or ...

Retail Sales were up 0.3%. Ex
autos Retail sales were down 0.3% as the price of gasoline dropped.

Macroblog, a financial website,
reports that this is the first year there has not been one bank failure since
the FDIC was created.

Proctor & Gamble raises estimates, Best Buy lowers estimates and the stocks are trading higher and lower
respectively. Best Buy is a surprise
since electronics are supposed to be the big sales items for the year.

The NYT is reporting that a Deutsche Bank analyst is saying that
sweaters are not selling and that AEOS
among other stores may be stuck with a large inventory of expensive sweaters.

Citigroup downgrades steel stocks.

Diebold fires the CEO who guaranteed a Bush victory. We don’t think
the events were related.

CNBC talking heads are back on a GM bankruptcy filing next year.
*****

Tuesday’s Markets December 13, 2005

9:51am and the Major Measures are mixed with market internals
negative. Breadth is 5/4 negative and new lows exceed new highs by 2/1.

Volume remains light ahead of the
Fed 1:15pm announcement.

Treasuries are flat on the short
end to 4 bps lower at the ten-year and Oil is up 45 pennies.
*****

Standard & Poor's on Monday cut GM's ratings deeper into junk
territory, saying a bankruptcy filing by the automaker is not
"far-fetched" if present trends at the company continue.

S&P cut GM's
corporate credit rating by two notches to "B," five steps below
investment grade, from "BB-minus." The outlook is negative, which
means the rating is likely to be lowered again over the next two years.
*****

1:15pm and the FED raised rates by 25 bps to 4.25% and changed the language removing
the word accommodative.

Stocks are higher on the news and Treasuries are lower in yield higher
in price.
*****

2:09pm and the DJIA popped up 100 points and the S&P 500 hit 1275 before both pulled
back heading into the final hour. Treasuries are a few bps lower on the short
end and a few more lower on the long end.

Traders are going to take some
time deciphering the Fed release since there were changes in the wording and
the casino needs some new words to trade on. We let a little MKC go above $30 to reduce some
accounts with oversized holdings but we are keeping our main position in the
stock.
*****

3:02pm and the DJIA closed up 56 points at 10825. The S&P 500 gained 7 points to 1267 and
the NAZZ rose 4 points to end at
2265. Breadth was positive at the
bell and new highs were a bit under
300 with new lows approaching 200. Volume picked up in the afternoon.

Treasuries were higher with the two-year at 4.42% and the ten-year
at 4.51%. Oil closed at $61.15 and gold ended at $525.

We have to help
shoe our horses tomorrow so there won’t be a post. But the casino
will be open and we will be in and out watching the gambling.

Next post will be
Thursday evening.
*****

12 December 2005 Daily Comment

Thoughts

This is Quadruple Witching Week and the Fed meets tomorrow. The Treasury Market is trading around the
wording the Fed will use when it makes its announcement. That they will raise
rates 25 bps is baked in the cake as
they say.

Overnight Japan
gained over 2 % and Honk Kong was also higher. In the Middle East,
Israel is considering
whether to bomb Iran’s
ability to enrich uranium. That potential event is flying well under the year
end holiday atmosphere of performance on Wall Street and is notbaked
in the cake as the say.

Treasuries are flat and oil
is a bit higher as is gold.

We are looking for some opportunities
but our not taking risk psyche is overwhelming
our desire to make money. And so we are watching.
*****

Monday’s Markets December 12, 2005

9:51am and the major measures are higher as are gas, oil and gold.
We are trading out of our EL
holdings for a 50 penny profit to a scratch loss. That leaves us with MKC.*****

Now Carl Icahn has Stephen Case,
the fellow who sold AOL to Time Warner for $100 billion, on his
side. Case thinks AOL should be spun off. We would guess that the folks at Time
Warner who have been cleaning up the mess Case made are not impressed.
*****

The levels on the S&P 500 for the past few weeks have
been 1245 support and 1270 resistance.*****

1:19pm and the major
measures are mixed to lower in light trading. Breadth is 5/4 negative and Oil
is again over $60. Treasuries are higher in yield with the two-year back to
4.45% and the ten-year at 4.56%.

Verizon looks to be heading under $30 again at which time we will
be interested. We also are look at KO,
CSCO, SYMC, PFE or more probably PPH
which is the Pharmaceutical Holders Trust, AT&T,
NOK and National City.
Only Nokia is higher than where we sold.

We want to see how the markets
react to the Fed tomorrow.
*****

Pfizer raised its dividend 26% to 24 pennies per quarter and that
caused the stock to rally and helped the DJIA pare its losses in the final
hour. Boeing also raised its
dividend 20%.
*****

3:02pm and Oil ended up $1.91 at $61.30. Treasuries closed higher in yield and Gold finished at $531. Europe
was mixed.

The DJIA closed at 10770 down 10 points, the S&P 500 rose 2 points to 1260 and the NAZZ gained 5 points to 2261.

Breadth was positive and volume was light. New highs exceeded 300
and beat new lows 3/1.

The casino opens as usual
tomorrow and awaits the Fed release at 1:15pm.
We’ll be here.
*****

9 December 2005 Daily Comment

Thoughts

Sometimes the actions of folks in
this business stink. In Japan
an employee entered an order to sell 610,000 shares of a stock at 1 yen when
the order was to sell 1 share at 610,000 yen. Come on folks, the traders on the
floor knew that was a bad order yet all merrily bought causing a $250,000,000
loss for the brokerage involved.
*****

Incidents akin to that have
occurred to us twice in our career. In one case the trades were busted and in one
case they weren’t. The share price of the trade was far enough away from the
actual trading price in both cases for the traders to know the orders were
incorrect. Ah well, capitalism is a hard taskmaster.
*****

Japan
closed up 1.5% recovering on Friday what it lost on Thursday in part because of
the bogus trade. The rest of Asia was also higher. Europe
is lower.
*****

Merck is in trouble again because they neglected to include 3 heart
attacks that occurred in a study they were doing which they published in The New
England Journal of Medicine. The Journal was not happy and said so
yesterday. Plaintiff lawyers were overjoyed.
*****

Wal-Mart has begun an advertising campaign to tell the world what
good corporate citizens and philanthropists they are. The ads remind us of the Philip Morris ads condemning smoking.
*****

The one stock that we own in all
accounts, MKC, dropped 10% in value
yesterday and a profit situation became a loss. That is the reason we sell
everything when we go to cash.
*****

Today is Friday and we can use
the week-end rest. And next week is quadruple
witching and the year end approaches so events may be more interesting than
this week.
*****

We haven’t written about the NKU Norsemen this year but as of last
night they were 6 wins and no losses. They were playing St Joseph’s in Rensselaer,
Indiana (which is ranked 8th in the country in Division II with 7 wins and no
losses) last night and losing by 16 points with 6 minutes left when the power
went out. So the NKU Norsemen remain undefeated and the last six minutes will
be played on February 22.

By the way one of the tests for
graduating from St Joe is to be able to spell Rensselaer.

RENSSELAER,
Ind. - A power outage in the
Scharf Alumni Fieldhouse on Thursday night has caused the men’s basketball game
between NorthernKentuckyUniversity and Saint
Joseph’s to be suspended late in the second half.

Saint
Joseph’s owned a 57-40 lead with 6:30 remaining in the game when the power went out in the
gym. The Pumas entered the game ranked No. 8 nationally with a 7-0 record,
while NKU is also unbeaten (6-0).

The game will be resumed at the
point of stoppage later in the season. The most likely date to complete the
game is Feb. 22, but an official announcement will be made next week.

NKU will play at Brigham Young
at 9 p.m. Saturday in Provo,
Utah.
*****

Friday’s Markets December 9, 2005

On this day in 2002 the DJIA lost it in the last hour of trading to
close down 172 points at 8473. The S&P 500 gave up 20 points to finish at
892 and the NAZZ dropped 55 points to end at 1367

On this day in 2003 The S&P 500 closed at 1060 off 9 points.
The NAZZ closed at 1908 down 40 points which was below its 50 day moving
average. The DJIA touched a new high at 10000 in the morning and closed lower
on the day at 9923 down 42 points.
*****

Univ of Michigan Sentiment Reading for December was a preliminary
87 versus 85 expected and last months 81 final. Why the heck do these guys and
gals issue preliminary and then final.
*****

It looks like Janus is up to its old tricks.
Janus Contrarian Fund has a great three year record and is outpreforming
the S&P 500, its benchmark, by a good margin. The WSJ reports:

Yet, part of the
reason for Contrarian Fund's success may surprise some of its shareholders. A
Sept. 30 posting on the Janus Web site said that about 46% of the fund's
holdings were in foreign companies. What the fund didn't spell out was that
$600 million, or 20.7% of total assets, was invested at that point in one
often-volatile emerging market: India.

Contrarian Fund has
so much money in India,
which has been rallying, that it ranks as one of the single biggest investors
in that country among U.S.
mutual funds.

Measuring the performance of stocks
of the India
stock market against the S&P 500 is nuts. The fellow running this fund says
that India is
not speculative. He’s been running money since 1998 so …..Moreover Janus got in trouble in 2000 and on
because it had large positions in stocks that became illiquid when they tried to
sell them and the whole rest of the hedge fund community shorted what they
owned as Janus was trying to sell. Supposedly Janus has turned over a new leaf
but the name of the game still seems to be performance and let the risk be worried
about later.
*****

11:53am and the major measures a slightly higher and breadth is positive.
Volume is light which may be because of the bad weather in the East. Chip
stocks are under pressure because traders didn’t like Intel’s mid quarter report.

Treasuries are up in yield and
oil is lower but remains above $60.
*****

3:02pm and boring is the
best word for today. Intel managed
to close higher and that gave the bulls a win for the day in a down week.

At the bell the DJIA was up 23 points at 10778 closing
above the important 10780 mark. The S&P
500 gained 4 points at end at 1259 and the NAZZ gained 10 points to 2257.

Breadth was 5/4 positive for the day and volume was light. There were a bit over 200new highs and bit
less than 100 new lows.

Treasuries gave back yesterday’s gains with the two-year going out
at 4.41% and the ten-year at 4.51%. The snowstorm ended in NYC before oil
trading and so oil finished down $1.27
at $59.39, gold closed at $529.

The casino is closed till Monday.
We’ll be here then.
*****

8 December 2005 Daily Comment

Thoughts

A few from an old farmer:

* Your fences need to be horse-high, pig-tight and bull-strong.

* Keep skunks and bankers and lawyers at a distance.

* Life is simpler when you plow around the stump.

* A bumble bee is considerably faster than a John Deere tractor.

* Words that soak into your ears are whispered...not yelled.

* Meanness don't jes' happen overnight.

* Forgive your enemies. It messes up their heads.

* Do not corner something that you know is meaner than you.

* It don't take a very big person to carry a grudge.

* You cannot unsay a cruel word.

* Every path has a few puddles.

* When you wallow with pigs, expect to get dirty.

* The best sermons are lived, not preached.

* Most of the stuff people worry about ain't never gonna happen anyway.

* Don't judge folks by their relatives.

* Remember that silence is sometimes the best answer.

* Live a good, honorable life. Then when you get older and think back, you'll enjoy it a second time.

* Don't interfere with somethin' that ain't botherin' you none.

* Timing has a lot to do with the outcome of a rain dance.

* If you find yourself in a hole, the first thing to do is stop diggin'.

* Sometimes you get, and sometimes you get got.

* The biggest troublemaker you'll probably ever have to deal with, watches you from the mirror every mornin'.

* Always drink upstream from the herd.

* Good judgment comes from experience, and a lotta that comes from bad judgment.

* Lettin' the cat outta the bag is a whole lot easier than puttin' it back in.

* If you get to thinkin' you're a person of some influence, try orderin' somebody else's dog around.

*****

Ford announced it is going to fire 30,000 folks to go with the
30,000 that GM is letting go. That
adds up to 60,000 high paying jobs that will no longer exist. Capitalism is a
cruel taskmaster.
*****

Microsoft and JP Morgan
along with many other companies are creating jobs in India
because their costs are so much lower. That is finally moving India
towards economic gain and in the long run will benefit the world. Unfortunately
the current generation of U.S.
workers is paying the price.
*****

We get e-emails:

Bud:
This report in tonight's Lemley Letter is especially
interesting...
Five year ago the DJIA closed at 10617. Today it is at 10786.
Five years ago the S&P 500 closed at 1343. Today it is 1255.
Five years ago the NAZZ ended at 2752. Today it is 2253.

Five years ago The Model Portfolio had a value of $356,000. Today it is
$561,000.

We respond:

It does suggest that short term
trading can produce positive long term results.

*****

Thursday’s Markets December 8, 2005

Jobless claims were 327,000 which
was a bit more than expected. Japan
and Hong Kong
were both down over 1.5% overnight.
*****

CSFB has cut McCormack’s price
target from $34 to $30 and the shares are of 50 cents this morning.
*****

10:03am and the major measures opened lower but now have moved to
plus territory in moderate trading. Breadth is slightly positives and
Treasuries are lower in yield higher in price. There is cold weather in the
East now so oil is up a bit and gold continues its higher move at $521.

We added a few more shares of MKC
to some accounts as it sold off
on the CFSB downgrade.
*****

12:05pm and we remain
nervous about the markets and so we sold our NCC for another scratch profit. The markets are acting like they
are going to rollover this afternoon and that is the reason for the sale.

Texas Instruments is now trading lower after trading higher this
morning on last night’s mid quarter report. Intel conducts the same mid-quarter review tonight.

3:02pm and the DJIA closed down 55 points at 10756. The S&P 500 lost 6 points to end at
1246. The NAZZ ended down 5 points
at 2246. Breadth was positive all
day but flattened at the close. Volume
was light. New highs exceeded 200
and beat new lows by a better than 2/1 margin.

Treasuries rallied with the two-year ending at 4.35% and the ten-year
at 4.46%. Oil also rallied on the
cold weather news and ended at $60.66 up $1.45.

Tomorrow is the last day of the week
the casino is open so it should be fun.

10745 on the DJIA was a support level which held today. The traders
we follow have covered their index shorts going into the close.

Will the big boys and girls want
to go home long or short ahead of next week’s quadruple witching days?
*****

7 December 2005 Daily Comment

Thoughts

Time moves on. Pearl Harbor Day is no longer
remembered. We remember since it was a part of our childhood.
*****

The reversal of yesterday’s
market in the last hour was quick. Whether it carries over for more than a day
will be the bull test of the day. A few gurus including us have been expecting
a pullback into mid December. So far we have been wrong.
*****

Prudential lowered its rating on NYT to underweight from neutral.

NY Times is on a five year low and selling at 15 times earnings and
about 8 times free cash flow.

In comparing the NYT to the Washington Post we find that the WPO has free cash flow of $200 million and is priced by the markets
at $7 billion while the NYT has free
cash flow of $500 million and is priced by the markets at $3.9 billion. WPO is 18% owned by Warren Buffet and that is the reason for
the premium.

We traded NYT earlier this year for a loss, thankfully much less of a loss
than we would have incurred had we held the issue. But it is year end and NYT
is on our list of interesting year end stocks. Today NYT announced that sales
and earrings will grow in single digits next year which is not enough to get
the analysts interested. But we are.
*****

American Eagle Outfitters is now at ten times earnings and was downgraded by CFSB this morning with a price
target of $17. That’s not good since the shares are or were trading at $20. We
are interested but will give it some more downside. Again this is a stock where
we took a nice profit and then a nasty loss and are happy to have followed our
selling losers with winners approach.
*****

Cisco was upgraded tooverweight byJP Morgan which commented that it thought the Scientific Atlanta purchase was a good fit. And Goldman Sachs reiterated their outperform rating. The shares are up 50
pennies to where we sold the shares a few weeks ago. We want to own the stock
again but at lower levels.
*****

The Asian and European markets were
positive overnight. Treasuries are
giving ground this morning and oil
is up though $60.
*****

We repurchased a few shares of Estee Lauder in very large accounts yesterday
since we want to own the stock over year end. We made a good quick profit on
the shares in the October/November period and are buying at a price above where
we sold. But the shares are down in price so much this year that we think the share
price will be walked up a bit into the December 31 close. That won’t happen for
a few weeks so we are taking our time.
*****

Tuesday’s Markets December 7, 2005

10:19am and the major measures are lower with breadth 2/1 negative.
Treasuries are a bit higher in yield. Oil inventories were greater than
expected and that has turned spot oil a few pennies lower after being higher
earlier this morning.
*****

Greenspan writes that it is not
always possible to know when a neutral rate is reached and attaining a neutral
rate is not always appropriate. And so he fades into the nothingness of his
words.
*****

1:02pm and with the DJIA down 75 points we bought shares of National City for larger accounts where we
traded it for a scratch profit at month end. We are buying below our cost then.
NCC is one stock we want to own in
more accounts at year end if the share price cooperates.

We also bought EL in larger/aggressive accounts with
room to buy more and added MKC to
smaller accounts that didn’t own it.
*****

Five years ago the DJIA closed at 10617. Today it is at
10786.

Five years ago the S&P 500 closed at 1343. Today it is
1255.

Five years ago the NAZZ ended at 2752. Today it is 2253.

Five years ago The Model Portfolio had a value of $356,000. Today it is $561,000.
*****

After the close today Texas Instruments will give its
mid-quarter forecast and tech traders are on pins and needles about it.
*****

Consumer Credit contracted by
$7.2 billion in October.
*****

3:02pm and the DJIA rallied a bit into the close but
still was off 46 points t 10810. The S&P
500 lost 7 points to end at 1257. The NAZZ
dropped 9 points to 2252. Breadth was
2/1 negative most of the day. Volume
was moderate.

Treasuries ended higher in yield width the two-year at 4.41% and
the ten-year at 4.52%. Oil was also
lower at $59.31 on the higher inventory numbers.

And the casino is open tomorrow
and we’ll be here.
*****

6 December 2005 Daily Comment

Thoughts

We enjoy the cold but this
current weather is a bit much for early December. We like to start off with a
few days below freezing and then work into below zero weather in February. We
guess global warming is taking a vacation this year.

The markets mood seems to favor
meandering near the highs for the year. The precious metals are all near 20
year highs. Oil is down today because the snowstorm in NYC petered out and the
traders are selling the oil they bought yesterday.

We have a few stocks we would
like to repurchase for the year end rally but we are going to wait until next
week’s Quadruple Witching to commit, if we do at all.
*****

Tuesday’s Markets December 6, 2005

10:45am
and the major measures are up about one half per cent in moderate trading.
There was no bad news this morning and with yesterday’s pullback some anxious
bulls are back in there buying.

Treasuries yields are down what
they were up yesterday and oil is down a few pennies.
*****

3:02pm
and we’ve been around all day but we haven’t been moved to any words of wisdom
or otherwise. At the bell the DJIA was up 21 points at 10856 after being
up almost 100 points at midday. The S&P
500 rose 2 points to 1263 and the NAZZ gained 3 to 2260. Breadth
was 2/1 positive all day and new highs exceeded 400 and were over 4 times new
lows. Volume was light.

Treasuries gained with the
two-year ending at 4.40% and the ten-year at 4.49%. Oil was pennies
higher at $59.95 and gold finished at $514.

The casino is open tomorrow and
we’ll be here.
*****

5 December 2005 Daily Comment

Thoughts

Crunchy snow and creaky wood have
signaled an early winter for the land of milk and honey. It hasn’t been this
cold for this long in early December for many years and considering that one
week ago it was 60 degrees the change is a bit startling.

But as with markets we adjust and
we have plenty of fire power to warm us and also to take advantage of any
market opportunities.

Boston Scientific is
offering the buy Guidant for $72 a share and so BSX is lower and
GDT is higher. Last week there were rumors that Abbott was going to buy
Boston Scientific and BSX jumped a couple of dollars.

JNJ had a deal with GDT at $76
but then lowered its offering price when GDT ran into trouble with the FDA over
some stents. Now JNJ is going to have to raise its
price. Maybe JNJ will just buy BSX and wouldn’t that make the investment
bankers happy.

Verizon,
according to Bloomberg, is trying to sell Directory Publishing operation
for $17 billion. Such a sale would provide funds for capital expenditures and
to reduce debt.

Since it is cold in the Northeast
with snow oil is higher on the morning session and looking to trade above $60.
Treasuries are a bit higher in yield lower in price. Japan
was up another 155 points overnight while Europe is
lower.

We are watching.
*****

Monday’s Markets December 5, 2005

10:05am
and the major measures are lower with breadth running 3/1 negative. Volume is
moderate and the down action is more profit taking and tax loss selling than
abandoning the rally. Of course that may change but oil moving above $60 is
helping the pause.
*****

2:03pm
and with the major measures all lower we are going to leave early to get our
snowshoe walk in before the sun sets. The DJIA is down 50 points, the S&P
500 is off 5 points and the NAZZ is down 18 points.

Breadth has been 2/1 negative all
day and Treasuries are higher in yield with the two-year at 4.46% and the
ten-year at 4.56%. Gold is closing over $60.

The casino is open again in the
morning and we’ll be here.
*****

2 December 2005 Daily Comment

Thoughts

We have very few and are looking
forward to enjoying the week-end. Our cash position is comforting.

Friday’s Markets December 2, 2005

Japan
was up 2% overnight and Hong Kong was also strong with Europe
following suit. The guru we follow found fault that yesterday’s move lower
before the strong rally did not touch the 1240 level and so he still expects a return
to lower levels before another sustainable upside rally. But many other gurus
think the power of sidelined money and trapped shorts will power the markets
higher this month without any pullback.

In November 215,000 jobs were
taken by folks and average earnings increased 0.2% with year over year earnings
up 3.2%. according to the talking heads ‘creative
destruction’ in the loss of high paying jobs at Merck and GM being
replaced by lower paying jobs at Wal-Mart are all part of the great economic
scheme that makes the U.S. economy vibrant and growing. We don’t agree.

Greenspan is giving a speech
today in which he worries about the deficit-which he helped tocreate- and also suggests that there may have
to be some tax increases although not soon and not before more spending cuts
for the poor and needy.
*****

10:28am and stocks opened lower and have been treading water for
the past hour. The major measures are mixed while breadth is negative.

Treasuries are flat to up a few
bps on the long end and oil is also up a few pennies.
*****

12:02pm and we are heading
off for an early week-end. As we leave stocks are mixed and breadth is
negative.

The casino is closed for the next
two days but as always the football pools and Las Vegas
beckon those who need the action.
*****

1 December 2005 Daily Comment

Thoughts

We are waiting for our December
correction scenario to play out over the next few weeks.
*****

Thursday’s Markets December 1, 2005

Retail sales numbers were not
good for AEOS, ok for GPS and a bit better for TLB.

Personal Income was up
0.4% in October and Personal Spending was up 0.2%.Jobless
Claims were 320,000 for the most recent week.

The ECB (European Central Bank)
raised their base rate to 2.25% from 2.0%. That was the first raise since the
ECB was created.
*****

Tomorrow the October employment
report is announced. Estimates rise to as high as 250,000 new jobs created. We
can’t wait.
*****

8:41am
and stocks opened like gangbusters out of the gate with the major measures
higher and breadth 3/1 positive. It is the first day of the month so that may
account for some of the action.

Treasuries are a tad better and
oil is up 25 pennies.
*****

11:19amand we took the dogs for their daily walk and upon returning found the
major measures strongly higher with the DJIA up 100 points. Some traders are
ascribing the up move to short covering (capitulation?). Others are saying that
performance anxiety is encouraging money managers lagging the markets to grab
anything with momentum.

Our December correction scenario
is blowing up.

Breadth is 3/1 positive and
volume is brisk. Treasuries are lower and oil is a few pennies higher.

We are waiting for 5% on the
two-year.
*****

Even with today’s 100 point plus
rally most of the stocks we sold are below our sale price and the overall
proceeds of our sale were greater than what we would receive today.
*****

In the short term 1270 on
the S&P 500 is a magnet/resistance point as is 1250.
*****

3:02pm
and the DJIA closed up 106 points at 10912. The S&P 500 rose
15 points to 1265 and the NAZZ tacked on 35 points to end at 2268.

Breadth was 3/1 positive
and volume was OK but not super. New highs exceeded 400 while new
lows were 122.

Treasuries gave a bit of
ground with the two-year and three-year and five-year at 4.43% and the ten-year
at 4.51%.

Oil closed at $58.47 and gold
ended at $507.

Tomorrow is the last day of the week
for the casino and traders are very interested in the monthly employment
report.
*****

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